Many businesses focus their entire marketing efforts on getting new customers. While Acquiring new customers is critical to growth, it's only one aspect of business development.
To achieve sustainable, predictable growth, businesses must leverage existing customers - both as a source of additional revenue and for qualified referrals. Marketing systems must be designed so they:
- Increase the customer base (net new customers) AND,
- Increase each customer's frequency of purchase (Lifetime Value)
- Increase each customer's average amount of purchase (Lifetime Value)
- Increase the number of prospects by pro-actively seeking referrals (net new customers from existing customer relationships).
In order to do so, this formula should be applied to every business:
- Build a customer data base.
- Systematically ask for more business and referrals.
- When you ask for more business or referrals, OFFER an incentive.
Seems simple enough - and it is. But many businesses ignore this untapped potential.
Let's use an example of a bistro in an urban center. You just opened your doors; however, a more well-known chain restaurant located in the same vicinity is capturing most of the business. How could you make the formula work?
First, have small cards with a space for each customer to print his/her name, address, phone, and e-mail printed. Put the words Grand Prize Eligibility Card at the top. Have the waiter hand each dining guest a card to fill out and inform them of a "giveaway dinner for two" - including unlimited bar drinks, appetizers, and desserts. Encourage customers to fill out the card (Build a customer database). Tell them the winner will be notified.
Pick a winner and contact him/her - and then send everyone else who entered the contest a letter.
My name is Michael, owner of The French Connection Bistro.
I'd like to thank you for visiting our restaurant – I trust you enjoyed the experience. I also thank for entering our drawing for a complete dinner for two. Jack Stevens won the prize and he and his wife said the food and service were terrific. I'm sorry you didn't win the first prize. But here's the good news: You've won a valuable second prize! If you visit our restaurant before the end of September, simply produce this letter and we will present you with a bottle of fine wine. If you can’t visit us by the end of September, give this letter to family or friends and we’ll still honour it. (Systematically ask for more business and referrals/offer an incentive).
Thank you again for your patronage. We hope to see you soon.
If the wine costs $10 per bottle, the total cost if 100 people take advantage of this offer is $1,000 (plus postage for the letter). If the average check is $150 at a 30% gross profit, that’s $4,500. You’re making money, building loyalty and securing new customers if the letter was passed on.
Keep in mind you’re likely spending money to attract new customers and studies show it costs 10 times more to attract a new customer than to retain an existing one. $1,000 is probably a fraction of what it would cost to attract 100 new customers.
Most businesses allow their customers to dictate how often they'll come back, how much they'll spend, and whether they’ll tell other people about your business. Proactively seek to work this lucrative source of business. Start immediately to do everything in your power to generate business from your existing customers.
If you don't, your competitors will.